Flex Pharma Reports Year End 2016 Financial Results

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Flex
Pharma, Inc. (NASDAQ: FLKS), a biotechnology company that is
developing innovative and proprietary treatments for cramps and spasms
associated with severe neurological diseases such as amyotrophic lateral
sclerosis (ALS) and multiple sclerosis (MS) and peripheral neuropathies
such as Charcot-Marie-Tooth (CMT), today reported financial results for
the year ended December 31, 2016 and provided an update on its clinical
development and corporate activities.

“When we initiate our Phase 2 clinical studies in ALS and CMT later this
year, FLX-787 will be amongst the most advanced, novel clinical
compounds in development for these conditions,” stated Christoph
Westphal, M.D., Ph.D., Chair and CEO of Flex Pharma. “With over $61
million in cash and investments at year end, Flex is well funded through
early 2019 to execute upon our value-creating objectives.”

“Our IND application for FLX-787 will be submitted in the next few
weeks, and we have attracted several ALS and CMT investigators who are
enthusiastic about enrolling in our parallel-design phase 2 studies here
in the United States. We are focused on accelerating development of
FLX-787 in the severe neurological diseases of ALS, MS and CMT, all
areas of high unmet medical need,” said Flex Pharma Chief Medical
Officer Thomas Wessel, M.D., Ph.D. “Since the hyperactive alpha-motor
neuron is the final common pathway involved in fasciculations, cramps,
spasms and spasticity, we believe our approach with FLX-787, a dual
TRPA1 and TRPV1 activator, may benefit patients afflicted with numerous
neurological diseases.”

“In our clinical studies, we continue to explore the impact of Chemical
Neuro Stimulation — the process by which a chemical signal, acting
topically, is translated into an electrical signal for the benefit of
patients — which we hope will prove to be helpful to those with severe
neurological disorders. We are encouraged by the initial response
HOTSHOT has received from more than 20,000 endurance and professional
athlete customers, and over 200 professional, collegiate and high school
sports teams, indicating that Chemical Neuro Stimulation is helping many
who suffer from debilitating cramps,” said Dr. Rod MacKinnon, Nobel
Laureate and Flex Pharma Scientific Co-Founder, Board Member, and
Scientific Advisory Board Co-Chair.

Business Highlights

• Clinical Efforts
  • In January 2017, the Company announced that it is prioritizing its
    clinical programs in the severe neurological diseases of ALS, MS
    and peripheral neuropathies such as Charcot-Marie Tooth. The
    Company intends to initiate additional Phase 2 studies in ALS and
    CMT in the US this year with FLX-787, its transient receptor
    potential (TRP) ion channel activator, formulated as an oral
    disintegrating tablet.
  • In 2016, exploratory Phase 2 efficacy studies were initiated in MS
    and ALS patients in Australia with FLX-787, the Company’s TRP ion
    channel activator. The randomized, controlled, blinded, cross-over
    studies are designed to evaluate the safety and efficacy of
    FLX-787 in patients who suffer from cramps, spasms and/or
    spasticity as a consequence of ALS and MS.
  • The Company’s results in its initial study of NLC was selected
    for late-breaking oral and poster presentations at the American
    Academy of Neurology (AAN) 68^th Annual Meeting held in
    Vancouver, B.C., Canada in April 2016. Only 14 abstracts were
    selected as late-breaking presentations at the AAN annual meeting.
    Details from the study, titled “Orally-administered TRPV1 and
    TRPA1 activators reduce Night Leg Cramps in a randomized, blinded,
    placebo-controlled, crossover human trial,” were presented during
    the Emerging Science Session.
  • Over the past year, Flex Pharma presented positive human efficacy
    data from randomized, controlled studies at several scientific and
    medical meetings, including the AAN, Experimental Biology, the
    American College of Sports Medicine (ACSM), the Society for
    Neuroscience, and the Americas Committee for Treatment and
    Research in Multiple Sclerosis (ACTRIMS).
  • In October 2016, the Company announced a strong statistical trend
    of FLX-787 in an exploratory human nocturnal leg cramps (NLC)
    study in reducing muscle cramp frequency (p=0.06) during the
    initial two-week parallel design of the study versus placebo as
    compared to the baseline run-in period. This analysis was based
    upon data from patients restricted to two sites (n=37), after data
    from a third clinical site was excluded due to a concentrated
    number of issues relating to patient selection.
• Consumer Launch
  • For the year ended December 31, 2016, the Company recorded
    approximately $1.0 million in total revenues for its consumer
    product, HOTSHOT, and approximately $299,000 for the fourth
    quarter of 2016. Launched in June 2016, HOTSHOT is a new 1.7 fluid
    ounce sports shot that is scientifically proven to prevent and
    treat muscle cramps by stopping them where they start: at the
    nerve.
  • In February 2017, Tim Reed, the reigning IRONMAN 70.3® champion,
    became an official brand ambassador for HOTSHOT. Reed started
    racing with HOTSHOT a year ago and, in 2016, had the most
    successful year of his career with wins at the IRONMAN 70.3 Asia
    Pacific Championship, IRONMAN® Australia and the IRONMAN 70.3
    World Championship.
  • In December 2016, James Develin, a fullback who played on the 2015
    and 2017 championship professional football team and a Brown
    University graduate, became an official brand ambassador for
    HOTSHOT. Develin was first introduced to HOTSHOT through his team
    nutritionist and became an avid user after trying it following
    several long practices.
  • In August 2016, four HOTSHOT brand ambassadors – marathoners
    Shalane Flanagan and Amy Cragg, and steeplechasers Evan Jager and
    Colleen Quigley – competed at the Rio Olympics. Evan Jager
    captured the silver medal in his event.
  • HOTSHOT became available on Amazon.com in October 2016.
• Expanded Board of Directors and Scientific Advisory Board
  • In August 2016, W. Larry Kenney, Ph.D., Professor of Physiology
    and Kinesiology at Penn State University, joined the Company’s
    Scientific Advisory Board. As the Marie Underhill Noll Chair in
    Human Performance and Professor of Physiology and Kinesiology at
    Penn State University, Dr. Kenney is focused on research involving
    human physiological responses and adaptations to exercise and
    extreme environments. Dr. Kenney served as President of the
    American College of Sports Medicine from 2003-2004. He serves on
    the American Council of Exercise Scientific Advisory Panel, Nike’s
    Science Advisory Board, and chaired the Gatorade® Sports Science
    Institute for several years.
  • In March 2016, Michelle Stacy, former President of Keurig Inc.,
    joined the Board of Directors of Flex Pharma. As the former
    president of Keurig, Inc. and former vice president and general
    manager with Gillette/P&G, Ms. Stacy brings a wealth of experience
    leading consumer businesses and building global brands. During her
    five-year tenure at Keurig Inc., a division of Keurig Green
    Mountain, the company’s revenue grew from $493 million in FY2008
    to $4.3 billion in FY2013.

Fourth Quarter & Full Year 2016 Financial Results

• Cash Position: As of December 31, 2016, Flex Pharma had cash,
  cash equivalents and marketable securities of $61.1 million. During
  the three months ended December 31, 2016, cash, cash equivalents and
  marketable securities decreased by $6.3 million. For the year ended
  December 31, 2016, cash, cash equivalents and marketable securities
  decreased $32.6 million.
• Total Revenue: Total revenue for the three months ended
  December 31, 2016, was approximately $299,000, including approximately
  $291,000 of net product revenue and approximately $8,000 of other
  revenue. Total revenue for the year ended December 31, 2016 was
  approximately $1.0 million, including approximately $990,000 of net
  product revenue and approximately $21,000 of other revenue.
• Cost of Product Revenue: Cost of product revenue for the three
  months ended December 31, 2016 was approximately $134,000. Cost of
  product for the twelve months ended December 31, 2016 was
  approximately $663,000 and included inventory write offs of
  approximately $282,000.
• R&D Expense: Research and development expense for the three
  months ended December 31, 2016 was $4.2 million and $20.4 million for
  the year ended December 31, 2016. Research and development expense for
  these time periods primarily included costs associated with the
  Company’s clinical studies of FLX-787, IND-supporting activities,
  personnel costs (including salaries and stock-based compensation
  costs), and external consultant costs.
• SG&A Expense: Selling, general and administrative expense
  for the three months ended December 31, 2016 was $3.9 million and
  $19.9 million for year ended December 31, 2016. Selling, general and
  administrative expense for these periods primarily included personnel
  costs (including salaries and stock-based compensation costs), sales,
  marketing and fulfillment costs related to launching the Company’s
  consumer brand and HOTSHOT, legal costs, and external consultant costs.
• Net Loss and Cash Flow: Net loss for the three months ended
  December 31, 2016 was ($7.9) million, or ($0.48) per share and
  included $1.2 million of stock compensation expense. For the year
  ended December 31, 2016, net loss was ($39.5) million, or ($2.43) per
  share and included $6.6 million of stock-based compensation expense.
  As of December 31, 2016, Flex Pharma had 16,773,798 shares of common
  stock outstanding. The net loss for the fourth quarter of 2016, as
  well as for the year ended December 31, 2016, was primarily driven by
  the Company’s operating expenses related to its research and
  development efforts, costs associated with the development and launch
  of the Company’s consumer brand and HOTSHOT, and general and
  administrative costs.

Financial Guidance

Based on its current operating plans and cash, cash equivalents and
marketable securities position, Flex Pharma expects to have sufficient
capital to fund its operations through early 2019.

Upcoming Events and Presentations

• Annual ROTH Conference, March 13-15, 2017 in Laguna Niguel, CA
• Oppenheimer Healthcare Conference, March 21-22, 2017 in New York, NY
• Jefferies Healthcare Conference, June 6-9, 2017 in New York, NY
• JMP Securities Life Sciences Conference, June 20-21, 2017 in New York,
  NY

Conference Call and Webcast

The company will host a conference call and webcast today at 8:30 a.m.
ET to provide an update on the company and discuss full year 2016
financial results. To access the conference call, please dial (855)
780-7202 (U.S. and Canada) or (631) 485-4874 (International) five
minutes prior to the start time. A live webcast may be accessed in the
Investors section of the company’s website at www.flex-pharma.com.
Please log on to the Flex Pharma website approximately 15 minutes prior
to the scheduled webcast to ensure adequate time for any software
downloads that may be required. A replay of the webcast will be
available on Flex Pharma’s website for three months.

About Flex Pharma

Flex Pharma, Inc. is a biotechnology company that is developing
innovative and proprietary treatments for cramps and spasms associated
with the severe neurological diseases of ALS, MS and peripheral
neuropathies such as Charcot-Marie-Tooth (CMT). Flex Pharma was founded
by National Academy of Science members Rod MacKinnon, M.D. (2003 Nobel
Laureate), and Bruce Bean, Ph.D., recognized leaders in the fields of
ion channels and neurobiology, along with Chair and CEO Christoph
Westphal, M.D., Ph.D.

Forward-Looking Statements
This press release contains
forward-looking statements for purposes of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements regarding our intentions, beliefs,
projections, outlook, analyses or current expectations concerning, among
other things: the design and timing of ongoing and anticipated clinical
studies, our expectations regarding the availability of our capital
resources, and our commercialization plans for our consumer product.
These forward-looking statements are based on management’s expectations
and assumptions as of the date of this press release and are subject to
numerous risks and uncertainties, which could cause actual results to
differ materially from those expressed or implied by such statements.
These risks and uncertainties include, without limitation: the status,
timing, costs, results and interpretation of our clinical studies; the
uncertainties inherent in conducting clinical studies; results from our
ongoing and planned preclinical development; expectations of our ability
to make regulatory filings and obtain and maintain regulatory approvals;
our ability to successfully commercialize our consumer product; results
of early clinical studies as indicative of the results of future trials;
availability of funding sufficient for our foreseeable and unforeseeable
operating expenses and capital expenditure requirements; other matters
that could affect the availability or commercial potential of our
consumer or drug product candidates; the inherent uncertainties
associated with intellectual property; and other factors discussed in
greater detail under the heading « Risk Factors » in our Annual Report on
Form 10-K for the year ended December 31, 2016 and subsequent filings
with the Securities and Exchange Commission (SEC). You are encouraged to
read our filings with the SEC, available at www.sec.gov,
for a discussion of these and other risks and uncertainties. Any
forward-looking statements that we make in this press release speak only
as of the date of this press release. We assume no obligation to update
our forward-looking statements whether as a result of new information,
future events or otherwise, after the date of this press release.

(1) As of December 31, 2016, the Company had issued approximately 5.4
million shares of restricted stock that are subject to vesting. Of these
shares, approximately 4.2 million shares had vested at December 31, 2016
and are outstanding for purposes of computing weighted average shares
outstanding. The remaining shares will be included in the weighted
average share calculation as such shares vest over approximately the
next 1.2 years.

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